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Explaining the lead–lag pattern in the money–inflation relationship: a microsimulation approach

Elena Deryugina and Alexey Ponomarenko

Journal of Evolutionary Economics, 2021, vol. 31, issue 4, No 2, 1113-1128

Abstract: Abstract We set up an agent-based model where the parameters of firms’ pricing heuristics are determined through evolutionary learning. We argue that there are several key ingredients that result in the emergence of the lead–lag pattern in the money growth–inflation relationship. First, a realistic representation of money creation through a lending mechanism is essential. Second, there must be considerable heterogeneity in the distribution of newly created deposits and in the associated changes in demand at the individual firm level.

Keywords: Money supply; Inflation; Cantillion effects; Evolutionary learning; Agent-based model (search for similar items in EconPapers)
JEL-codes: C63 D83 E31 E51 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s00191-021-00741-8

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Journal of Evolutionary Economics is currently edited by Uwe Cantner, Elias Dinopoulos, Horst Hanusch and Luigi Orsenigo

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